A lot has been written recently about the lottery. There’s a direct correlation between articles written about the lottery and the size of the payouts and with recent ticket price increases, Powerball and Mega Millions jackpots are more often growing to levels that would make even Jay-Z blush. The news hits, the billboards go up and suddenly, there are lines outside of every gas station and convenience store in the country.

I’m not here to bash the lottery. I can even admit, as personal finance expert and blogger Jean Chatzky did in a recent newsletter that when one of the major lotteries reach these fevered pitches, I’ve been known to buy a ticket. But doing a little more digging into our country’s lottery habit has me a little stunned.

For example, a WebMath study reported than one-third of Americans believe the lottery is the only way to become financially stable. One-third. One hundred or so million people who believe that lottery ticket is their only path to financial success.

We know the lottery is a game. We know it is a long shot. In fact, we probably aren’t capable of grasping just how truly big of a long shot it is. Tara Siegel Bernard of the New York Times did a great job in an article earlier this month trying to define the exact odds. Needless to say, they’re staggering.

There’s even a new website, ShouldIPlaytheLottery.com, that will help calculate whether or not the actual payouts and odds of a given lottery are worth the cost.

The point to all this is, the lottery is often most appealing to those who can afford it the least. The pull of potentially solving all of life’s problems with just 5 or 6 lucky numbers overwhelms the facts, which are simple. We’re not going to win.

I hate to be the wet blanket, but as a financial planner, I’m used to the role. If you play the lottery once in a blue moon or as a social activity in a group when the jackpots really get big and know it’s harmless fun, similar to an occasional latte at Starbucks, proceed. We all spend our entertainment money in our own, unique ways. If that few minutes of fun are worth a dollar or two to you, there are worse things you could be doing.

But, if your lottery behavior is much more frequent; if you’re playing both major lotteries, the scratch offs, the nightly state games, etc. in the hopes of winning big. Stop. Take that money and save it. I know you’ve heard this before, but let this be the time you listen.

Save that money. Look at the rest of your spending and where you can cut back there as well. Pick something that you’ve had your heart set on, something that you’d buy without a care with those lotto winnings. Slowly, but surely, watch your money grow. Reward yourself and buy that item, then pick the next savings target. Consider it your own little jackpot. It’s not winning the lottery, but the entertainment value will last much longer and you’ll be well on your way to being a true winner in the long run.

Recently reflecting on some of cinema’s greatest intellectual quotations, I was reminded of movie Detective James Carter’s infamous query in 1998’s Rush Hour. Chris Tucker’s character eloquently asked Jackie Chan’s character, Chinese top cop Detective Lee, “Do you understand the words that are coming out of my mouth?”

Ok, maybe not one of the most memorable moments on the silver screen, but a funny movie that stands up well fifteen years later. But, that’s not what we’re here to discuss. The quote actually jumped into my head during a discussion about how we communicate with one another, especially in advice-based relationships.

A seemingly infinite amount of information is available on virtually every issue known to humankind, all searchable within seconds from any place with access to the World Wide Web. How we process this information, understand its meaning and filter the good, the bad and the ugly really depends largely on whether or not the information is communicated in a manner we can comprehend.

This certainly has its applications in the world of personal finance. I’d argue the personal finance industry at-large, more often than not, adds layer upon layer of complexity to relatively simple concepts in order to add an air of sophistication and justify an unnecessary amount of cost. I won’t go further on that today except to say that if something sounds too good to be true, you can’t understand it, what it costs and what risks are involved, run away.
Instead, I want to focus on the authentic struggle many financial planners and advisors have in working to develop the right communication strategy based on their clients’ needs.

Scalability allows a company to grow, taking a successful model and increasingly diluting it for consumption by an increasingly growing audience. The problem with scale in the financial planning business is that those seeking advice are all at different points in their lives, with different goals, different resources to meet those goals and different ways to achieve success in meeting those goals.

We also all comprehend things differently, learn through different stimuli and apply concepts to our daily lives at different speeds. Confused? Me too. What does all this mean?

It means that we have a gap in the relationship between financial planning professional and client that both sides have to work to fill. Financial planners need to ensure they have a process in place to help identify how best to communicate concepts and recommendations in a manner that best suits each client involved.

The client, on the other hand, has the duty to speak up when they don’t understand something in their plan, be it an investment recommendation, the path to reach a savings goal or a concept or term used to illustrate a point or answer a question. “I don’t know” or “I don’t understand this” are not only acceptable responses to questions posed or information presented by a financial advisor, but should be a welcome opportunity for the advisor to take an improved approach in helping the client comprehend, thereby teaching the advisor a little more about communicating with their client and challenging them to find better ways to illustrate concepts in the future.

The bottom line is, we all need to be more vigilant about what we understand about the decisions we make and are made for us in our daily lives. When it comes to an advice-based relationship, the more we question, challenge, and discuss, the deeper, more rewarding the relationship will be. Wowing someone with the ability to use big, complicated words to make a point isn’t a talent. Effectively communicating in a manner that gives your audience the best opportunity to understand is.

I recently attended a funeral mass for the father of a client. It was a wonderful occasion to reflect on a well lived life of more than 90 years. Our client and his siblings were able to eulogize and honor their father beautifully in what was a touching ceremony all around.

I was especially happy for this client who, recognizing that his father’s health wasn’t always going to be a certainty, had spent the last year making some extra trips back home to spend time with his Dad. Having this time to share, visit, debate and enjoy each other’s company in the time leading up to his passing must have meant a great deal to both.

I recount all this as it dawned on me during the ceremony how often we miss an opportunity in waiting until someone is gone to really reflect on their role in our lives and how fortunate our client was to not have missed that opportunity. Eulogies serve a great purpose for loved ones to share and remember all the wonderful things about those that have passed, but the greater opportunity is to share those things with those we care about while they’re still with us.

This is certainly not a new concept, but one that often makes the ever growing list we all carry around that contains our “important, but not urgent” best intentions. We take for granted that others know how much we truly value them or, even if we do feel it needs to be said, are too embarrassed, proud or just don’t have the words to explain to another person what kind of impact they’ve had in our lives.

This blog has touched on many of the important issues surrounding proper estate planning, having one’s affairs in order and ensuring that everything that can be done to carry out our wishes is in place. That’s not a message we’re likely to stop delivering any time soon. It’s a crucial component to both our financial and emotional peace of mind. All I suggest is adding letting those we care about know what we value about them to that estate planning to-do list.

Adding to these kinds of lists typically increases the potential burden and reduces the likelihood that we will actually carry them out. My hope is that this particular suggestion will actually incent us to take action. Adding something that should be rewarding for both you and those you love will hopefully move your end of life plans up your to-do list.

So, while you’re deciding who should take care of your affairs after you’re gone, how to manage your estate for minor children, whether there is sufficient insurance in place to cover your income, or any of the other many questions surrounding your estate, be sure to share not only your plans, but what makes your loved ones such a special part of your life.

The result could mean a great deal to you and those you love both during and after all are here to enjoy.

As you may have seen on this or other sites, April is Financial Literacy month. While some people go back and forth as to whether or not literacy is the right term, the fact is it’s never been more crucial to have a good grasp of your own personal financial situation and to educate yourself and your family as to how they relate to money.

Movements to include more financial education at all levels have cropped up across the country. Many states have passed laws mandating some level of financial education in state curricula, but funding has not followed. Many business leaders have called for an increase in awareness and education, but concrete solutions have not been realized. I attended the RISE Conference at the beginning of the month where even Federal Reserve Chairman Ben Bernanke referenced the need for financial education as a key pillar to improving the long term economic picture for our country.

So, what does this mean to me and my family?

Efforts by federal, state and local governments, school boards and other institutions to determine how best to increase personal financial education amongst all Americans is an admirable goal, but one likely to take a generation or more to truly have an impact.

That’s not to bemoan those efforts. Shifting how a population thinks about something as fundamental to our lives as money is a big job. It’s simply to suggest that perhaps it’s time those of us that are so inclined pick ourselves up by our proverbial boot straps and take charge of our own financial education.

How do I do that?

It all depends on your current personal financial knowledge, what areas need some improvement and who you are. No matter where things stand in your life, there are countless tools available to help. Yes, the internet can be a bit of a gamble as to the quality of information available, but that’s no excuse for not taking the time to seek out free or inexpensive resources that could dramatically change your financial future.

Giving specific examples of where to go to find great resources for all the various stages of life is a whole series of blogs for a different day. For now, I’ll just give you a quick list of some of my favorites.

Starting YoungFor teaching children some of the basic tenets about respecting money, there’s a new website called The Secret Millionaire’s Club. The club was partially developed by Warren Buffett who acts as the mentor in the animated series to a group of entrepreneurial kids. Guest appearances by Jay-Z, Shaquille O’Neal and other celebrities add to the fun. The website features information on how to access videos, related games and other tools to help kids embrace strong financial values.

Establishing A BudgetAh, the monthly budget. A process loathed by many and fully embraced by few. Yet, we know it to be one of the best ways to keep spending in line. There are lots of tools out there to help make this process a little less of a chore. My current favorite is You Need a Budget or YNAB. YNAB is great because it’s not just a way to track spending, but a whole philosophy shift in how you approach your month to month needs. The software comes at a cost, but the related education tools around spending, taxes and other financial areas add lots of value.

If you’re more interested in just seeing where the money is going and keeping track of your assets and liabilities, Mint offers a free service through their website which is widely established as an industry leader.

Saving For CollegeSurprisingly, the College Board administers much more than just the SAT. It’s also a great resource for learning more about financial aid, college scholarships and the college planning process. If you’re just looking to get over that shock of how much you might need to save to help pay for a child’s education, Bankrate has a great calculator that allows you to add multiple dependents, choose between in-state, out of state and private schools and include savings you’ve already stashed away.

This is far from an exhaustive list, but just a way to get you started thinking about different ways you can improve your financial IQ on your own. None of this takes the place of finding a trusted adviser to provide one-on-one advice when you want to get serious about your specific situation, but a lifetime of improved decisions about your money starts with the first step.

Don’t wait another month or for another reminder about how important your personal finances are to your life. Take that first step today!

A recent article in Time featured a study by the Deloitte Center for Financial Services suggesting many American pre-retirees are throwing in the towel when it comes to saving or planning for retirement. Insufficient savings combined with the market downturn five years ago, a housing bubble, extended low interest rate environment and a Federal government seemingly bent on making it difficult to plan for the long term has created a perfect storm for many. This will be a significant problem facing Boomers over the next few decades.

But, this blog is not meant for those near retirement. This is for the Millennials entering the workforce and the Gen Y folks already there. It’s a brief wakeup call about your future financial goals and retirement plans. The short version – you’re on your own. Your retirement plan is not and cannot be that of your parents.

For most, pensions are a thing of the past. 401(k)s and similar plans are great places to start saving, but have their limitations. Social security is likely headed for substantial reform that will leave future benefits unclear. Medicare will face significant changes over the long run. Many of the sources past generations have relied on to help care for them in their later years are more vulnerable than ever before.

Sound frightening? It is. But it’s no excuse to throw in the towel. Inaction is not an option. There are simple, but not always easy ways to put meaningful plans and processes in place to enjoy today while keeping a mindful eye on tomorrow. You just have to be willing to commit to a plan and stay true to your own values.

The bottom line? Knowledge is the key. Not about which stock to pick or what your magic number is for retirement. Instead, you need a firm grasp on what you really value in life, what you want to do for your children or others close to you, and a realistic view of what resources you have and how much you’re willing to balance those resources between goals for today and those for tomorrow. You need to revisit these questions on a regular basis to make sure you’re on track and be clear in how you communicate expectations to all those impacted by your financial decisions.

I’m no pessimist. Quite the opposite as I think the future ahead is very, very bright. I also believe that we can meet our goals, provided there’s a plan in place, we stay true to that plan, protect against the unexpected to a responsible degree and really have a grasp on what’s important to us as early as humanly possible.

The most dangerous things we put off are those that are important, but not urgent. The best time to start mapping out your plan for today, tomorrow and well down the road is now. It may not feel urgent, but it may be the most important thing you do any time soon. The you that is 20, 30 and 40 years down the road is counting on you.

The media’s job is ultimately to make money by selling advertising. How much advertisers are willing to pay depends on how widely their message will be distributed. That is measured by how well a television network, magazine or newspaper does at maintaining eyes on the screen or sales at the newsstand. Unfortunately, that often means the more negative a story or the more fear a topic instills, the more exposure it’s likely to receive. This is a common complaint, yet we keep watching.

Going back to my blog from last month, an investor’s job is to earn a return on the money they invest in line with the risk taken. Despite some volatility based on truly unforeseen headlines, the market is much less sensitive to the media and much more concerned with what is actually going on in the companies that comprise a given marketplace than the average investor.

In other words, to get a true sense at what’s going on at the markets, look at the markets, not the guy on TV keeping you glued until the next commercial break.

One quarter does not an investment lifetime make, but I’d like to use the fourth quarter of 2012 as a brief case study in lending some credence to the above point.

Going into the fourth quarter of 2012, it was hard to find much optimism. Most Americans had grown tired of an intensely divided election, Superstorm Sandy devastated the East coast and the fiscal cliff was looming on the horizon. In fact, I’ve spoken with many people who still believe that 2012 was a bad one for the markets.

Let’s look at some of the crises that many “just knew” would sink the markets to end the year and what wound up occurring in reality . . .

Europe’s unemployment rate hits 11.6% signaling more problems for international investors:
International developed markets were up 5.93% just in the 4th quarter of 2012 (represented by the MSCI World ex USA Index (net dividends))

Greece’s debt and budget woes would continue to keep drag down developed market returns:
Greece, for the second quarter in a row, led developed markets with a return of 17.87% for the fourth quarter (represented by MSCI All County World IMI Index)

China’s slowing economy meant that emerging markets were in trouble to end the year:
Emerging markets stocks were up 5.58% for the 4th quarter of 2012 (represented by the MSCI Emerging Markets Index (net dividends))

An Obama re-election spelled doom for the U.S. market:
The S&P 500 Index finished 2012 up 16% for the year

Those fearing the doom and gloom should take refuge in commodities, specifically gold:
Commodities ended the quarter down -6.33% with Gold down -5.65%. Commodities overall wound up down -1.06% for 2012 (All represented by the Dow Jones-UBS Commodity Index Total Return)

I want to stress again that this is just a one quarter snapshot. It’s not to suggest that anyone should have invested or sold any of their investments based on the above information. It simply illustrates how strongly our emotions can be pulled by headlines when what actually occurs in reality is a much, much different story.

So, what is an investor to do with this information? Not as much as you might think. It’s less about action and more about awareness. Have a plan, stick to it, be aware of the world around you, but careful of the motivations of those telling the story. Try to separate your concern for local, national and world events from your long term investing strategy.

I recently received a “March Madness” promotional offer from an industry publication that involves picking mutual funds which are then put into a bracket similar to the format for the NCAA Men’s basketball tournament. Once you select funds, they are monitored over the same six weeks as the NCAA tournament and a winner is ultimately determined based on the funds’ performance during that timeframe.

Now, I’m no prude. I enjoy March Madness, filling out brackets and watching student athletes leave everything on the court as they strive to make the next round in search of a championship. It’s one of the most exciting events in all of sport and something I look forward to every year.

I also understand different industries wanting to get in on the act and borrow from that kind of excitement to generate excitement of their own. It is relatively harmless fun to pick a few mutual funds and see how they do over a short period of time.

The difference is far too many would describe this as an “investment game.” In fact, this has absolutely NOTHING to do with investing. It can be argued what kind of time horizon is justified to analyze the return of various investments, but six weeks certainly isn’t sufficient.

Investing, at least as far as the stock market goes, is committing your money to a business with the expectation of obtaining a fair return over time. This return can come from dividends paid out by the business or in appreciation of the value of your stock based on the company’s growth. This stems from the business using your (and other investors) money to hire people, innovate and develop new products and improve operations. This takes time and certainly comes at a risk. The company could lose money or go out of business entirely leaving you with nothing. In fact, the relationship of how risky the business you invest in might be directly relates to how much return you might expect from your investment.

Speculation in the stock market, on the other hand, is attempting to guess about the future movements of a company, a sector or the market at large. In other words, it’s more of a way of placing bets on what you think might happen. The risk here is clear, you could be wrong. In fact, most studies show that our ability to make these guesses (when to get into an investment and when to get out) correctly over and over again is much, much less productive than just choosing a broadly diversified portfolio of investments and then staying invested according to whatever mix of stocks, bonds and cash fits our risk tolerance and goals over the long run.

If the goal is to have some fun with a non-basketball “bet” during March Madness and seeing what a spin of the market wheel gets you over a six week period, I hope all involved enjoy. What I want to make sure the average investor out there is crystal clear on, however, is to not recognize an entertaining, speculative game for the true benefit of the capital markets, which is to enjoy a long term return equivalent to the amount of risk being taken.

Speculation can be fun. Investing should be reserved for helping us meet our long term goals. Knowing the difference can be the key to a successful experience with either.